*1 dangers essentially “simple” component reads the out of simple-product exception. Consequently, majority the rejects simple-product exception without ever ad- dressing its merits.
Although disagree majority’s rejection I with the simple-product exception, I would hold that it does preclude application risk-utility test in this simple product. case because the Aim N Flame is not a Applying agree majority test, I with the that there genuine was sufficient evidence to raise a material issue respect question of fact with of whether a feasible design Consequently, summary alternative was available. judgement improper. on the strict count was
(No. 101570. Appellees, MARGUERITE FORSYTHE al., et Appellant. USA, CLARK INC., Opinion February 2007. filed *3 Odorizzi, Jr., Mayer, of John C. and Michele Berghoff, Maw, Brown, Chicago, appellant. & for Rowe LLR Wilier, Corboy and & Corboy H. Edward G. Philip Niewiara, Quinlan Demetrio, EC., William R. and James Jr., and Carrol, Healy, and Martin J. Quinlan and Huber, for Chicago, appellees. David E all of Tennant, Chicago, Tennant, & Francis K. of Wolf for amicus curiae Lawyers Illinois Trial Association. of the judgment
JUSTICE GARMAN delivered court, with opinion: in the Fitzgerald
Justices and Karmeier concurred judgment opinion. and concurred, opinion,
Justice Freeman specially with joined by Justice Burke. took
Chief Justice Thomas and Justice Kilbride no part in the decision.
OPINION 13, 1995, On March F. Forsythe Gary Michael and Szabla, mechanics at a owned and refinery operated (Clark Clark and Refining Refining), Marketing were killed. The of each payment estate decedent received Refining from Clark pursuant Compensa- to Workers’ (820 (West 2002)). seq. et tion Act ILCS 305/1 plaintiffs Forsythe and Elizabeth Marguerite Szabla, special of their administrators estates husbands, late filed suits Clark against Refining other defendants. Clark Subsequently, added USA, Refining’s parent company, Clark as a defendant. Clark is the only USA defendant involved in this ap peal. At the close of the trial discovery, granted court Clark motion summary judgment USA’s pursuant (735 section of the Code 2—1005 of Civil Procedure ILCS (West 2002)). trial court did state its The 5/2 —1005 reasoning. appealed, appellate Plaintiffs court App. Following reversed and remanded. 361 Ill. 3d 642. decision, petitioned defendant this court for leave to (177 appeal pursuant Rule 315 Ill. 2d Supreme Court 315). R.
We two is- granted petition defendant’s to consider *4 first, company sues: can hable parent whether be held liability for control- theory
under a of direct way in a led to a ling subsidiary’s budget accident; second, theory recognized, if such a workplace the Workers’ exclusive-remedy provision of whether the (West 2002)) (820 im- Act ILCS Compensation 305/5 liability. from parent company munizes a
BACKGROUND Island, in Blue operated refinery an oil Refining Clark company Refining’s parent Defendant is Clark Illinois. On March decedents were and sole shareholder. refinery, out at the their lunch break when a fire broke on caused when apparently The fire was killing them both. attempted replace Refining employees Clark other that flammable materi- ensuring on a without pipe valve Plaintiffs depressurized. had been pipe als within maintenance those were not employees claim that perform qualified were not trained or mechanics and they attempting. were the work around liability center allegations Plaintiffs’ strategy. Specifically, budgetary defendant’s overall to use duty breached a that defendant plaintiffs allege strategy on its business imposing reasonable care (1) Refining] [Clark Refining by “requiring Clark training, including costs for minimize costs operating (2) “requiring maintenance, safety,” supervision to those capital to limit investments Refining] [Clark thereby refinery for the cash generate which would reinforcing Refining] adequately from preventing [Clark the lunchroom relocating of the lunchroom the walls (3) “failing to refinery,” and position to a safe within training procedures safety and evaluate the adequately Moreover, plaintiffs Refinery.” Island at the Blue place forced capital cutbacks strategy of allege that defendant’s act as employees unqualified to have Refining Clark fire turn, led to the which, mechanics maintenance argue, consti- This, plaintiffs the decedents. that killed cause. proximate tutes *5 summary judgment,
In support of motion for duty defendant contended that it no either owed to by holding decedent virtue of its status as a mere company, Refining only which was connected to Clark as prove a shareholder. to Defendant submitted evidence Refining operated that Clark owned and the refinery while defendant itself had no control over the day-to-day operations. Plaintiffs countered that defendant was directly responsible creating for conditions that precipi- tated accident.
In support argument, their cited evidence that defendant’s Clark approved directors created Refining’s budget, striving to itself as a low “position cost refiner marketer” with the goal replenishing cash defendant’s reserve by “decreasing] capital spend- *** ing through to minimum sustainable levels” institution of a “survival mode” plan. business Plaintiffs produced also evidence that boards directors of Refining Clark and defendant met simultaneously. Moreover, plaintiffs relied upon evidence that the belt- tightening budget by created Clark Refining was overseen Melnuk, Paul as president who served defendant’s as well chief executive officer of Clark Refining.
The granted trial court summary judgment without explanation. Subsequently, plaintiffs appealed and the appellate remanded, court reversed and a rejecting claim by defendant that it immunity was entitled to under the Compensation Workers’ appellate Act. The court held “plaintiffs presented sufficient evidence to raise an issue of material fact as to whether directly defendant participated in creating refinery conditions within the deadly which led to fire.” 361 Ill. 3d App. at 655. One justice dissented, finding plaintiffs presented no separate acts, evidence of solely defendant, attributable directly injuries which defendant caused the (McNulty, J., case. 361 Ill. App. dissenting). 3d
ANALYSIS the Code of Civil Procedure 2—1005 of Section pleadings, provides summary judgment when any together depositions, file, af on with and admissions any genuine as to fidavits, show that there is no issue moving party is fact that the entitled to material such (West judgment as a matter of law. 735 ILCS 5/2—1005 2002). judgment try summary purpose The simply question if determine one exists. of fact but (2002). Oliphant, 2d 201 Ill. Robidoux summary judgment disposition, reviewing this court strictly against the movant and record will construe the liberally *6 nonmoving party. v. TLC Jackson favor of the (1998).Moreover, Associates, 418, 2d 423-24 Inc., 185 Ill. summary judgment dispositions it must be noted that moving party’s right allowed the “should unless judgment Jackson, 185 is clear and free from doubt.” undisputed could lead 2d 424. If the material facts Ill. at divergent inferences, or where observers to reasonable summary judg dispute fact, as a a to material there is by the the issue decided trier ment should be denied and a 2d 424. This court reviews Jackson, 185 Ill. of fact. grant summary Opiela, judgment 211 novo.Roth v. de of (2004). 536, 2d Ill. 542 Liability Participant Direct
I. negligence, plaintiffs a action for To state cause of duty and defendant owed breached must show that Espinoza injury. proximately causing plaintiffs care, the Ry. Elgin, 107, Co., Ill. 2d 114 165 Joliet & Eastern v. (1995). in this case is the existence The threshold issue duty, question court to for the is a law of a which Co., Ill. 2d R.R. 207 v. Illinois Central decide. Chandler (2003). recently stated, the “touch 331, As have 340 we duty analysis to ask whether this court’s stone of relationship plaintiff stood in such a defendant upon imposed an the defendant that the law one another
281 obligation of benefit of reasonable conduct plaintiff.” Burger King Corp., 222 Marshall v. 2d Ill. (2006), citing Happel Stores, Inc., Wal-Mart (2002). inquiry: 2d Ill. Four factors inform this (1) (2) foreseeability injury, the likeli reasonable (3) injury, guard magnitude hood of of the burden of (4) against ing injury, consequences plac ing upon Marshall, the burden the defendant. Ill. 2d at 436-37. undertaking analysis, note, did
Before our we parties appellate theory court, and the that the of direct presented previously here has not been It addressed Illinois. has been addressed in other throughout courts,
states and the federal however. We authority appropriate will consider this where in our analysis. argue
Plaintiffs that defendant demanded Clark Refining refinery operate pursuant an overall busi- strategy adversely safety ness that it knew would affect by forcing training reductions in and maintenance. actively Indeed, contend that defendant directly Refining’s mandated unreasonable cuts in Clark budget carry strategy. strategy in order to out its This calling was outlined in Clark USA business records for a accomplished philosophy “survival mode” business through capital spending,” working “reduced “reduced capital expense operating investment,” and “reduced *7 allege level.” Plaintiffs that this “survival mode” strategy despite mandated, was the fact that defendant only budget knew should have known the feasible safety, training maintenance, cuts would come from expenses. and plaintiffs’ This, conclude, constitutes direct participation by in harm such, defendant the caused. As appellate correctly contend the court found duty that defendant a on owed them based the direct participant theory legal relationship and on not the subsidiary. defendant to its for
Defendant contends that unless standards met, company corporate parent veil are a piercing subsidiary. of its negligence be held liable cannot parent rule that a principle Attendant to that is parties supervise not a to third company duty does owe subsidiary the conduct of its to ensure or control Refining acts with reasonable care. Clark owed subsidiary provide them duty employees nondelegable a defendant, a while owed workplace parent, a safe with Refining that Clark met its duty whatsoever to ensure no obligations. recognized if is
Additionally, liability direct even recovery, argues simple that the task theory of defendant an overall goals employing financial setting but, instead, improper is not strategy goals to meet those status” and parent’s with the investor is “consistent United- give liability.” rise to direct thus “should 43, 62, 51, 69, 141 L. 2d 524 U.S. Ed. Bestfoods, States (1998). Because its conduct was S. Ct. status, defendant investor always consistent with its it claims, participant to treat as a direct there is no basis alleged herein. negligence in the held is a “[i]t Court has Supreme While the *** in economic ‘ingrained our deeply general principle *** li- is not parent corporation that a legal systems’ (Bestfoods, 524 U.S. its subsidiaries” for the acts of able 55-56, quoting 118 Ct. at 61, 141 L. Ed. 2d at S. Liability Shanks, & Insulation Douglas C. W.O. from L.J. 193 39 Yale Subsidiary Corporations, Through the direct (1929)), body supports case significant law liability urged plaintiffs. theory of participant quoted article on the 1929 authority of that relies Some then-Professor written, part, relevant above Douglas. O. William imposed has been noted that
Douglas
directly
parent
“instances where
*8
wrong
of.” 39
at 208. In such
complained
the
Yale L.J.
instances,
the
power
“the use of
latent
incident to stock
ownership made the
accomplish
specific
par-
result
act,”
or
participator
specifically
ent
doer of the
in the
evident where “there was interference
internal
management
subsidiary;
overriding
of the
an
of the
managers
subsidiary.”
discretion
the
of the
39 Yale
Douglas
L.J.
209.
stated further that “direct interven-
parent
tion
in the affairs of the
intermeddling
subsidiary and
in the
particularly
more
transaction
involved,
disregard
to the
and orderly
of the normal
procedure of
control
out
corporate
through
carried
election of the desired directors
and officers of the
subsidiary and
handling by
them of
direction of
affairs,
its
have been
seems to
determinative
in some
to holding
cases
Yale
parent liable.” 39
L.J. at 218.
The
Supreme
United
quoted
States
Court
the Doug-
las & Shanks article
approvingly
Bestfoods,
U.S. at
(“As
64-65, 141
L. Ed. 2d at
agent accepted *9 oversight subsidiary’s facility.” of a parental norms 71-72, 62, 141 524 L. Ed. 2d at 118 S. Bestfoods, U.S. at 1889. Ct. at Esmark,
Similarly, Inc. v. Labor National Rela- (7th Board, 1989), tions 887 E2d 739 Cir. the Seventh Circuit, in a dealing potential a case with violation of the Act, Douglas Labor Relations cited & Shanks’ National Judge article and noted that Learned Hand extensively recognized corporation could be held parent also parent for the its subsidiaries if the liable actions of directly supervised specific the conduct transaction. Lake Kingston Dry Champlain Transporta- Dock Co. v. (2d Co., 265, 1929), Judge tion 31 F.2d 267 Cir. Hand liability depend that such must “normally upon wrote transaction, in the parent’s ignor- the direct intervention subsidiary’s ing paraphernalia incorporation, the direc- authority, and officers.” on that the Seventh Relying tors li- corporation may Circuit held that “a held parent subsidiary parent able for the of a where wrongdoing in the unlawful ac- directly participated subsidiary’s Esmark, F.2d at 756. tions.” 887 Moreover, parent held that “[w]here the court subsidiary, using the actions of its specifically directs than ownership merely interest to command rather present direct cajole,” possibility of separate imposed parent disregards will be “where (and subsidiary subsidiary’s of its legal personality and exercises ‘paraphernalia’), decisionmaking own Esmark, 887 specific direct control over a transaction.” The as a “transaction- at 757. court described this F.2d numerous theory participation, citing of direct specific” held have been liable for parent companies cases where Esmark, 887 F.2d at by their subsidiaries. misconduct Industries, see, Inc. v. (collecting cases); e.g., L.B. 756
285
(9th
1987)
Smith,
69,
curiam);
F.2d
Cir.
(per
Sutton,
United
1040,
States v.
795 F.2d
1060 (Temp.
1986) (“A
Emer. Ct. App.
may
shareholder
be liable if he
is a ‘central
figure’
a corporation’s
conduct”);
tortious
International,
(9th
Ltd.,
Cher v. Forum
634,
692 F.2d
1982);
Cir.
D.L. Auld Co. v. Park Electrochemical Corp.,
(E.D.N.Y. 1982)
804,
553 F. Supp.
(denying summary
judgment
in favor of the defendant where the plaintiff
presented a claim that the defendant
participated
patent infringement perpetrated by its subsidiary); Inter-
Union,
national
United Auto Workers v. Cardwell Manu-
Co.,
(D.
facturing
416 F. Supp.
1283-84, 1287-89
1976) (court
Kan.
parent
found a
liable for breach of
bargaining agreement by subsidiary where parent specifi-
cally directed the subsidiary
disregard
obligations
under
NLRA);
Olsen,
Ltd.,
State v. Ole
35 N.Y.2d
*10
980,
886,
(1975)
324
886,
N.E.2d
528,
365 N.Y.S.2d
528-29
(holding
corporate
a
officer liable not on account of his
being an officer of the corporate defendant but as an ac-
tive individual participant
in the wrongdoing); Cooper v.
Cordova Sand &
Co.,
Gravel
261,
485 S.W.2d
271-72
(Tenn.
1971);
App.
My Bread
Co. v.
Baking
Cumberland
Farms, Inc.,
614, 619,
353 Mass.
748,
233 N.E.2d
752
(1968)
(holding that while common
and
ownership
management will
ordinarily
not
give rise to liability, li-
ability may be imposed where there is active and direct
participation by one
corporation
the affairs of another
or where there is “confused intermingling” of the activi-
ties of the
corporations);
two
Crescent Manufacturing Co.
v. Hansen,
(1933).
174
193, 198,
Wash.
24 E2d
606
Under this “transaction-specific”
theory,
shareholders
parent corporations are not held directly liable for their
own independently wrongful
but, instead,
acts
for their
actions against
third-party interests through the agency
of subsidiaries. Esmark,
interposing Esmark, F.2d at 756. subsidiary. li- of direct approving cases
Plaintiffs also cite other Industries, Inc., 937, 166 F.3d v. ability. Katy Papa (7th Circuit, interpreting 1999), again Cir. the Seventh Act, continuing Relations evinced the National Labor it cited Es- liability when for direct support state “that Dock to mark, Kingston Dry Bestfoods, corporation protect parent liability does limited its own held liable for sought to be parent when subsidiary as the owner of act, merely than rather Technol- Component Similarly, Pearson that acted.” law, federal Circuit, interpreting the Third Corp., ogy *** it has employed not often “[although stated li- may ‘directly’ acknowledged parents long been ‘alleged actions when subsidiaries’ able for their parent through be traced to seemingly can wrong management,’ personnel of its own conduit subsidiary’s operations interfered with the has parent by parent exercised the control surpasses way 471, 486-87 Pearson, 247 F.3d ownership.” incident of an 64, 141 L. Ed. (3d 2001), 524 U.S. citing Bestfoods, Cir. at 207. 39 Yale L.J. quoting 58, 118 S. Ct. at 2d at Co., F.2d Diamond Coal Likewise, in v. Blue Boggs (6th Circuit, interpreting 1979), the Sixth 655, 663 Cir. of direct its recognition indicated law, implicitly Kentucky immune is not parent that “a it stated liability when own, for its subsidiary employees liability to its from tort negligence.” acts of independent Court, in Commissioner Supreme The Indiana *11 RLG, Inc., v. Management Environmental Department of (Ind. direct 2001), accepted 559, also 556, 563 N.E.2d 755 sole of- defendant’s it held a liability when participant Indiana of violations liable for ficer and shareholder individual, that “an stated laws and environmental *** be may capacity corporate in a though acting
287 *** participant individually under as a direct liable Supreme Additionally, general legal principles.” the Iowa liability theory participant accepted of a direct Court liability corpora- of a limited it held that a member when perform it had undertaken tion could be sued because allegedly corporation management services for the Country- negligently. performed Estate those services Cooperative 598, Ass’n, man v. Farmers 679 N.W.2d (Iowa 2004). theory accepted the Other courts have also liability. participant e.g., v. See, United States of direct (8th Corp., 1082, Cir. Investment 68 F.3d 1091 n.9 TIC 1995) (interpreting Comprehensive Environmental Liability Response, Compensation, Act, the court may directly parent corporation held that “a liable for subsidiary ostensibly by its if the activities carried out actually operated parent corporation, effect, subsidiary’s facility by having authority to control actually substantially controlling facility”); (1st Kayser-Roth Corp., 24, United v. States 910 F.2d 1990) (parent corporation directly Cir. can be held liable actively subsidiary); if in the its involved affairs of Das- Corp. Supp. Inc., sault Falcon Jet v. 909 F. Oberflex, (M.D.N.C. 1995) (direct 347, 354 against parent company could be maintained for breach warranty). together, Taken make these cases evident weight authority supporting recogni- the substantial theory liability. tion of this opposition plaintiffs’ theory, defendant contends parent corporation duty supervise
that a owes no subsidiary’s parties. conduct for the benefit of third Young BrycoArms, Defendant cites 2d Ill.
(2004), recognition this court noted its where general duty rule that “one has no to control the conduct prevent causing of another to him from harm to third party, special relationship person absent a with either the causing injured party.” Building on that the harm or the
point,
argues
uniformly
defendant
that courts have
rejected
argument
that
the parent-subsidiary
rela
tionship qualifies as the kind
“special relationship”
necessary
give
duty
rise to a
to
or control
supervise
the conduct
the subsidiary.
In re Birmingham Asbestos
(Ala. 1993).
Litigation,
them and RSI can ‘force’ them to do it wants. by itself, however, power, impose duty upon That does not Only power by exerting RSI. if RSI abused too much — control —could it be held liable for the conduct of its ego.” Joiner, Supp. subsidiaries as an alter 966 F. at 1490. Additionally, defendant contends that direct partici- pant claims identical to those raised here virtually were decisions, rejected by two state one from Texas appellate Torres, and one from California. In Corp. Coastal (Tex. 2004), App. refinery employees injured S.W.3d 776 brought in an action explosion negligence against refinery’s parent company. employees alleged The that “ ‘through budgetary central exercised authority *** *** corporate Coastal’s officers Coastal assumed maintenance, turnaround, and inspection control over ” expenditures, matters at limited plant,’ in a subsidiary way “controlled and influenced its injuries.” Coastal directly appellees’ Corp., resulted at The Coastal court noted Corp. 133 S.W.3d 779. alleged “negligent that the in that case control plaintiffs budget, negligent specific control over details of activities,” eventually found that operational Texas parent company duty had no as a matter of law its subsidiaries in order to assure “approve budgets for premises.” repair their defects on the subsidiaries Corp., 782. 133 S.W.3d Coastal Superior Management Similarly, Inc. v. in Waste (2004), Comp. Diego, Cas. 759 69 Cal. San Court company against parent brought an action budget subsidiary’s controlling negligently such repair- subsidiary replacing prevented from the ing was recognized The direct trash trucks. court *13 may duty parent liability aris- owe a and stated that “the parent obligations independent ing the subsid- of out of Comp. iary relationship.” Management, Cal. Waste however, hold, that The court went on to Cas. at 762. intentionally mismanaging controlling “Negligently a or duty part subsidiary’s budget on the does not create safety prevent parent corporation to ensure the Manage- subsidiary’s employees.” injuries Waste Comp. ment, 69 Cal. Cas. at 763. points Corp. out, Coastal and Waste
As defendant budget- Management proposition for the that mere stand ary enough support mismanagement is not direct liability. Additionally, participant however, the Coastal liability apparent Corp. is noted that “it is that court activity specific imposed when there is control over Corp., that caused the accident.” Coastal S.W.3d Similarly, Management court stated that 779. the Waste they plaintiffs’ could not show case failed because parent company and authorized the that the “directed subsidiary manner in conducted its business.” which original.) Management, (Emphasis 69 Cal. in Waste Comp. words, these courts found Cas. at 763. other participant liability the direct that a viable claim of theory under budgetary mismanage- solely upon rest cannot mismanagement up budgetary ment, can make one but part conjunction claim, in with the direction of viable activity or authorization of the manner which an The Joiner decision echoes this sentiment. undertaken. granted summary judgment There, the court in favor of parent/defendant, noting significantly the parent/defendant that get day-to-day
did “not involved in the management activities or Joiner, subsidiaries.” Supp. upon analysis, 966 F. at 1490. Based we budgetary mismanagement, accompanied conclude that parent’s negligent direction or authorization of subsidiary accomplishes manner which the budget, can lead to a valid cause of action under the participant theory liability. direct Considering above, we hold that direct theory recovery is a valid under Illinois law. prove parent Where there is evidence sufficient company budgetary mandated an overall business and strategy strategy specific and carried that out its own surpassing authorization, direction or the control ownership disregard exercised as a normal incident subsidiary, parent company for the interests of the liability. key application could face The elements to the participant liability, parent’s specific then, of direct are a direction or authorization of the manner in which an activity foreseeability. parent is undertaken and If a *14 company specifically activity, injury directs an where is parent Similarly, foreseeable, that could be held liable. if parent company mandates an overall course of action specific and then authorizes the manner in which activi- contributing undertaken, ties to that course of action are injuries. again stress, it can be liable foreseeable We though, allegations budgetary mismanage- of mere give application ment alone do not rise to the of direct liability. finding supported by policy-based Our the factors duty courts use to determine whether a exists. Marshall (the Burger King Corp., 222 Ill. 2d 436-37 factors at (1) (2) foreseeability injury, are the reasonable of the (3) injury, magnitude the of likelihood of the of burden
291 (4) consequences and injury, against guarding defendant). heavy Certain upon the burden placing great inherently involve industries, refining, like that severe cutbacks It is conceivable danger. amount maintenance, in such training safety, staffing, foreseeability, lead, reasonable could with industries in those injury The likelihood of others. injury deadly. remote and could be not be circumstances would guarding of the burden Additionally, magnitude Parent great. companies not be against injury such would strate- budgetary are free to craft overall business directly must not interfere gies; companies simply such certain activi- in the manner their undertake subsidiaries no free to utilize longer ties such that the subsidiaries are if do Alternatively, parent companies expertise. their own their subsidiaries directly interfere in the manner activities, must do so with reason- they undertake certain Finally, require able care. it is not an undue burden in the considered parent corporations engage limited role. As we already exercise of due care an are already acknowledged, parent corporations have their generally not liable for the acts of subsidiaries. 61, 55-56, 141 Ed. 2d 118 S. Bestfoods, 524 U.S. at L. 1884, Moreover, mere quoting Ct. at 39 Yale L.J. 193. relationship, great fact of a without parent-subsidiary more, liability. 524 give Bestfoods, deal does not rise 1884, 61, 56, quot- 2d at 118 S. Ct. at U.S. at L. Ed. Fletcher, Corpora- of Law of Private ing Cyclopedia W (rev. 1990). §33, tions at 568 ed. consistently high repeatedly
This court has every person “axiomatic that lighted point it is care to duty ordinary all others a to exercise owes to reason naturally flows as a guard against injury which of his act.” ably probable consequence and foreseeable (1992), Ill. 2d Frye v. Medicare-Glaser Corp., 2d Union 31 Ill. quoting Rope Corp., Nelson v. Wire *15 292 (1964);
86 see also Mt. Zion State Bank & Trust v. Communications, Inc., Consolidated 110, 169 Ill. 2d (1995); (1990); Durkee, 369, Widlowskiv. 2d 138 Ill. (1983). E&B, Inc., 360, Feldscher v. 95 Ill. 2d 368-69 Recognizing parent company may duty that a have a upon participant liability based direct does not end the analysis though. present Certain facts must still be give application. rise to its Participant Liability Applied
II. Direct Returning specific case, issue this we must question resolve whether there exists a of material fact presented such that the evidence could lead a reasonable observer to believe that defendant’s overall business and budgetary strategy negligent involved the direction or Refining authorization of the manner in which Clark grant so, conducted If its business. the trial court’s summary judgment inappropriate. was strategy
Defendant’s overall business
at the time of
tragic
accident involved here mandated increased
productivity
part, by budgetary
driven, at
least
cuts.
question
though,
The
remains,
whether those cuts were
negligently
directed
in a
conducted
manner
expense
authorized
defendant at the
of Clark Refin-
ing. Answering
question requires
a close look at the
president,
Melnuk,
role of defendant’s
Paul
who also
Refining.
served
chief
executive officer of Clark
Supreme
pointed
In Bestfoods, Court
out that
“recognize
entirely appropri-
lower courts must
that ‘it is
parent corporation
ate for
of a
directors
to serve as direc-
subsidiary,
may
tors of its
and that fact alone
not serve
expose
parent corporation
for its
”
subsidiary’s
69,
acts.’
at
Bestfoods, 524 U.S.
L. Ed.
citing
60,
2d
118 S. Ct. at
American Protein
(2d
1988).
Corp.
Volvo,
AB 844 F.2d
Cir.
The
“
acknowledged
principle [of
Court
corporate
‘well established
holding
posi-
law] that directors and officers
*16
“change
subsidiary
parent
can and do
and its
tions with
separately,
corporations
represent
the two
hats” to
”
ownership.’
despite
524 U.S.
Bestfoods,
common
their
citing
1888,
Lusk
61,
Seizing upon language, April Committee,” the Executive 1995 “Memorandum to completed prepared on Clark USA let- Melnuk, Paul including entitled “1995 terhead, a document point plaintiffs Imperatives.” Moreover, Economic agenda record, for the business another Clark USA meeting, February 15, 1995, of directors which board Liquidity includes a section entitled “Clark USA Over- lays view.” That document out a “survival mode” busi- philosophy capital spending,” ness marked “reduced working capital “reduced investment,” and “reduced operating expense level.” The document further states “goal replenish [defendant’s] strategic that the is to cash emphasis reserve to million.” $200 Defendant’s continued goal supported by Impera- on this the “1995 Economic “Replenish tives,” one of which was to cash balance to by reducing capital spending 200 million” to “minimum Relying sustainable this, levels.” on contend budgetary strategy the business and defendant mandated this case was carried out for its own benefit *17 expense safety spending at the foreseeable and at Clark Refining and at the direction such, of Paul Melnuk. As only budgetary strategy benefit of the business and in involved Refining. this case ran to defendant and not Clark plaintiffs argue, proves
This, that Paul Melnuk acting Refining was not on behalf but, of Clark instead, on behalf of Clark USA. opposition, testimony defendant cites the of Paul Impera-
Melnuk himself where he claims that the 1995 though completed tives, letterhead, on defendant’s were actually Refining. Additionally, carried out for Clark Imperatives defendant notes that the 1995 include continuing spend necessary discussion of the need to on safety existing health and as well as ensure that all safety fully sup- environmental, health, needs are ported. very genuine least,
At the there is a issue of material wearing fact as to whose “hat” Melnuk was when he completed the 1995 If memorandum. the fact finder acting concludes that Melnuk was on behalf of defendant wearing “hat,” thus his Clark USA there is some directing authorizing evidence that he was or the man- Refining’s budget implemented ner in Clark which was participant duty, under the direct that he had such theory liability, care. The ad- to so with reasonable do indicating produced evidence ditional budgetary in- reductions Melnuk knew both that large part controllable had to in from here come volved equipment training, repairs, and education, such costs as compromis- were maintenance, and that these reductions safety refinery ing material fact raises an issue of at the duty. The to whether or defendant breached summary grant judgment was therefore court’s trial inappropriate. acting defendant, Melnuk, If Paul on behalf of budget in the manner which directed authorized duty in a taken, he had a to do so cuts this case were way. nonnegligent If Melnuk directed or authorized the budget taken, at were manner which the knowing cuts issue safety refinery Island would be Blue superseding compromised, and did so the discretion and Refining, interest Clark direct duty applies Determining could attach. whether case, liable, the facts of this and whether defendant is Holy inquiry. e.g., See, involves factual O’Hara Cross (1990) (this Hospital, 2d Ill. 342-44 court held hospital duty protect a that whether or not a nonpatient had a emergency an invited into room involved nonpatient inquiry into was invited factual whether the patient participate the care treatment summary judgment hospital and thus in favor of was *18 inappropriate). inquiry This is this not suitable for court disposition appropriate for at sum on review and especially considering mary judgment, that this court strictly against moving interpret must the record the liberally nonmoving party party. and in favor of the Jackson, 2d 185 Ill. at 423-24. Immunity the Illinois
III. Under Workers’
Compensation Act liability Having is a found that direct potentially theory case, valid of and recovery in genuine of issue material fact as to applica- exists tion, we analyze still must the remedy provi- exclusive (820 sion of the Compensation Workers’ Act ILCS 305/ (West 5(a) 2002)). that, Defendant claims if it even were found liable under the direct participant theory, the exclusivity provision renders it immune. The provision, 5(a) Act, found section provides: “No common statutory law or right damages recover *** employer from the injury any death sustained employee engaged while in the of duty line his as such employee, compensation other than provided, the herein any employee available to who is provisions covered the 305/5(a) (West 2002). ***.” this Act 820 ILCS provision This serves a function. the balancing On one hand, “system the Act establishes liability new fault, designed without to distribute the cost of industrial injuries regard without to common-law doctrines of negligence, contributory negligence, risk, assumption of Milwaukee, the like.” Gannon Chicago, Paul & St. Co., (1958). Ry. 13 Ill. 2d On the other Pacific hand, imposes the Act “statutory limitations upon employee’s amount of the recovery, upon the depending character and the injury” extent and provides statutory “that remedies it shall under serve as the employee’s remedy exclusive if he sustains a compensable Co., injury.” Caterpillar McCormick v. Tractor 85 Ill. 2d (1981). 352, 356 plaintiffs’ theory
Defendant asserts that this case be no differently should treated than a conven- theory, veil-piercing contending tional that plaintiffs’ claim has to parent company interfered to an subsidiary’s such extent should business that it situation, be treated if it subsidiary. were the continues, parent company defendant has become subsidiary/employer subject should be protections same burdens entitled to the same
297 subsidiary/employer the Workers’ under would have Corp., CyclopsWelding Compensation Koteckiv. Act. See (1991) (holding party sued that a third 146 2d 155 Ill. bring workplace injured employee a accident can in a an employer, against the the but that claim contribution employer’s liability limited to the amount it would is Act). Compensation required pay the to under Workers’ liability, reject argument. this Direct We piercing recognize it, on the does not rest we now subsidiary liability corporate is such the veil that contrary, liability parent. form of the On the this the suggests, parent’s for asserted, as its name a is superseding participation, inter- discretion and direct leading subsidiary, creating conditions est of the activity complained Here, that of. claim creating directly participated in defendant conditions refinery Blue led to the fire within the Island directing authorizing which Clark or manner cost-cutting budget Refining’s instituted with no was regard Refining of Clark discretion interest itself. requesting essence,
In that it be allowed defendant liability. pierce corporate its own veil in order to avoid consistently expressed reluctance for Illinois courts have allowing practice. such See re Rehabilitation (1994) Co., 166, Centaur Insurance 158 Ill. 2d 173-74 (citing approval principle general that the law with piercing made of a mandates that must never be in favor corporation shareholders); Chicago Main Bank (1981) (stating party Baker, 188, v. 86 Ill. 2d 206 equitable piercing “cannot assert the doctrine corporate corporate disregard separate exist veil corporation gain an he himself created to ence of present advantage conten be lost under his which would App. tion”); Corp., Hughey Ill. see Rosner Hoffman (1982); Brothers, Inc., Milburn 3d Schmidt v. (1998). 296 Ill. 3d App. appellate The court recognized this case point rejected when it defen attempt dant’s “to its cake it asserting, have and eat too: hand, on the one it was merely a shareholder *20 it arguing duty decedents, while, owed no at the time, the same attempting grant invoke the Act’s of immunity characterizing itself the as decedents’ employer.” Ill. App. 3d 651-52. Schmidt,
In was made point particularly clear. That plaintiff injured case involved a in a a collision with driver worked loosely who for a company affiliated with defendant, the plaintiffs own employer. The defendant in the case protection asserted the of the exclusive remedy of the provision Workers’ Compensation Act. The court not persuaded, stating was that: right,
“[I]f defendants are pays nothing [defendant] for the negligence compensation its premi driver —no workers’ ums, benefits, liability. no workers’ compensation no tort remedy provision That would turn the exclusive of the Compensation sword, [Workers’ Act] into a instead of purpose shield. No useful societal would served. [Defendant] would receive all the the provides benefits law separate corporate to a body distinct with none of the Schmidt, App. usual detriments ***.” 296 Ill. 3d at 269. agree analysis. We with this It Clark Refining, was defendant, not who workers’ paid benefits compensation to the decedents’ families. It was Refining, Clark defendant, who actually employed the decedents. As such it is Refining, USA, Clark not Clark enjoy that should the remedy provision exclusive of the Compen- Workers’ sation Act. We pierce decline to allow Clark USA to its own corporate Accordingly, veil. Compensa- Workers’ tion liability. Act does not immunize defendant from
CONCLUSION Drawing no ultimate conclusions on the merits of case plaintiffs’ summary and mindful is judgment an extraordinary remedy, summary judgment inap- was partici- direct recognize matter. We in this propriate theory however, that this note,We liability. theory pant circum- in limited only duty rise to a liability gives insufficient, is a is oversight alone Budgetary stances. with acts consistent commission company’s parent investor status. parent that a to show sufficient evidence
If there is the manner which directed or authorized corporation however, duty Specifi- arises. undertaken, activity an is directing care in reasonable duty to utilize cally, activity is under- the manner which authorizing li- can be held corporation Accordingly, parent taken. or authorizes benefit, it directs if, its own able implemented, subsidiary’s budget in which its manner subsidiary, discretion and interests disregarding situ- conditions. such creating dangerous thereby not be protected will ations, parent-defendants Compensa- of Workers’ remedy provision exclusive tion Act. *21 reasons, the court’s appellate we affirm
For these summary judgment grant trial court’s reversal of the for to the circuit court of the cause and its remand proceedings. further
Affirmed. KIL- and JUSTICE THOMAS CHIEF JUSTICE decision of in the consideration or part took no BRIDE case. FREEMAN, concurring: specially JUSTICE time, recognizes first today, for the ruling Our recovery theory a valid liability is participant direct record that, specific on the also find under Illinois law. We granting in case, trial court erred in this the presented on Inc., summary judgment defendant, USA, Clark I in claims. am liability participant direct plaintiffs’ major- result reached the ultimate agreement with ity opinion. separately, I however, write to offer additional support summary judgment reasons of the reversal of in this matter. plaintiffs’
In March decedents were killed in a explosion occurring fire which followed an at their workplace, refinery refinery located Blue Island. The operated by employer, is owned and decedents’ Clark (Clark Refining Marketing, Refining). & Inc. Defendant, USA, Inc., Clark owns 100% of the stock of Clark Refin- ing. allege Plaintiffs that the fatal fire started when operators, untrained who were not maintenance mechan- performed ics, maintenance tasks and disassembled a being which, valve instead of drained of flammable pressurized. materials, was still result, As a these materi- escaped eating als and burst into flames. Decedents were building in a lunchroom located in the maintenance refinery across an access road from the maintenance explosion subsequent trapped work, and the fire they escape building. killed them before could Subsequent accident, suit, filed nam- ing Refining’sparent company, Clark USA, Inc., Clark as upon theory a defendant based of direct controlling budget subsidiary of its way directly workplace such a led to the accident ultimately, and, to the death of decedents. Plaintiffs al- leged negligently imposed that defendant an “overall strategy” directing subsidiary business to minimize capital allegedly costs and investments, which caused the subsidiary engage dangerous practice in the of reduc- ing training According plaintiffs, and maintenance. parent company, a result of this direct interference operators assigned perform dangerous untrained were *22 plant. maintenance tasks at occurred, the This large backlog contend, because there was a maintenance specifically caused economic cutbacks dictated and profits. directed defendant in order to increase its own litigation, par- lengthy During the the course of discovery, engaged amount of in an extensive ties have including exchange records of countless business taking depositions numerous individuals of of well as during prior, knowledge occurred the events that of with appellate Indeed, the the time of the accident. and after 60 volumes and matter exceeds record in the instant nearly pages. cause weeks before this 15,000 Two reaches County jury trial, circuit court of Cook was set pursuant summary judgment granted to sec- defendant (735 ILCS Procedure the Code of Civil tion 2—1005 of 2002)). (West granting order The trial court’s 5/2—1005 summary judgment, only that defen-
however, stated specific granted find- no was and contained dant’s motion ruling. ings by for its court to indicate the basis the trial procedural posture that the instant cause It is in this appeal. must, therefore, review comes to us on We ruling whether, under court to determine of the circuit specific case, of this facts and circumstances summary judg granting court erred defendant circuit propriety determine the ment. The standards used to summary grant judgment are familiar and well a try summary judgment purpose is not to settled. The question rather, but, of fact to determine whether genuine Adams v. Northern issue of material fact exists. (2004). entry The Co., 211 Ill. 2d 42-43 Illinois Gas only summary judgement appropriate “the is where together depositions, pleadings, file, on and admissions any, genuine affidavits, if show that there is no with the moving any party issue as to material fact and that judgment as a matter of law.” 735 ILCS entitled to a 1005(c)(West2004). 5/2— determining genuine issue of material whether pleadings, deposi- exists, construe the
fact a court must strictly against the mov- admissions, affidavits tions, Bagent liberally opponent. ant and favor *23 302 (2007).
Blessing
Corp.,
154,
Care
224 Ill. 2d
162-63
A tri
precluding
entry
summary judgment
able issue
ex
disputed
ists where the material
where,
facts are
being undisputed,
persons
material facts
reasonable
might
undisputed
draw different inferences from the
Bagent,
Although summary
facts.
with transpiring prior, several individuals familiar with events during subsequent accident, raise numerous genuine issues of defendant, material fact as to whether through Refining, negligently its direct control of Clark training employees caused the maintenance and at the facility degrade Blue Island to such a level safe operation plant impossible,ultimately of the became lead- ing to the fatal accident in this case. juncture, opinion today
At this
I underscore that our
principle
liability
does not alter the bedrock
of limited
corporate
shareholders,1
and that direct
very
exception
general
is a
narrow
to this
Supreme
1As the United States
Court observed in United
Bestfoods,
States v.
“it is hornbook law that ‘the exercise of the
ownership gives
“control” which stock
to the stockholders ... will
”
liability beyond
subsidiary.’
create
the assets of the
Best-
foods,
61-62,
U.S. at
L. Ed. 2d at
118 S.
atCt.
Shanks,
quoting
Douglas
Liability
W.O.
& C.
Insulation from
(1929).
Through Subsidiary Corporations, 39 Yale L.J. 193
the proposition
stands for
decision
Today’s
principle.
poli
general
articulates
merely
company
if parent
decisions,
subsidiary’s budgeting
supervises
cies
li
rise to direct
give
enough
is not
conduct alone
such
words, conduct
In other
parent.
ability
part
on the
investor
parent’s
“consistent with
entirely
v. Best
United States
problem.
pose
status” does not
43, 62,
S. Ct.
51, 69,
2d
141 L. Ed.
524 U.S.
foods,
(1998).
company
1876,1889
Thus,
parent
activities
*24
“monitoring of
subsidiary, such as
that
involve the
subsidiary’s
of the
subsidiary’s
supervision
performance,
decisions,
articulation of
and
capital budget
finance and
will,
give
generally,
general policies
procedures,”
72, 141 L.
U.S. at
liability. Bestfoods,
direct
524
rise to
question”
The “critical
62,
Ed. 2d at
could be with its and directors because it shares its officers simply such a against opinion today guards Our subsidiary. “it cannot be result, recognizes principle as it 304
enough
liability [under
participation
to establish
a direct
theory]
policy
that dual officers and directors made
deci-
supervised
facility.”
sions and
activities at the
Bestfoods,
69-70,
It should be
a will
company
generally
corporate
observes
formalities
step
proper
parent
pervasively
outside role of a
to so
operations
subsidiary
interfere with the
that it can
directly inflicting
subsidiary’s
be viewed as
harm on the
employees
parties doing
or third
business with the
however,
us,
plaintiffs
In the matter before
subsidiary.
defen-
evidence of conduct
have
sufficient
presented
of material
fact as to
genuine
dant
create a
issue
deemed “ec-
only
could not
whether
that conduct
oversight”
norms of
accepted
parental
centric under
72, 141 L.
524 U.S. at
subsidiary’s
(Bestfoods,
business
1889), but also “plainly
Ed. 2d at
118 S. Ct. at
subsidiary yet
the interests of the
nonethe-
contrary to
at
advantageous
parent” (Bestfoods,
less
524 U.S.
n.13),
n.13,
n.13,
141 Ed. 2d at 61
It is this background that we have reviewed the following example, business records. For point to a business record entitled “Clark USA Liquidity agenda Overview.” This document is for the part USA, Inc., February 15, Clark board of directors meeting, philosophy commands that the “1995 *26 mode,” “goal survival and that is to replenish strategic cash reserve to goal million.” This was to $200 accomplished through capital spending,” “reduced investment,” “reduced working capital “reduced operating expense level.”
Defendant’s continued focus on goal this financial reflected a document entitled “Interoffice Memoran- dum,” April 19, 1995, which is dated from Paul Melnuk to the “Executive Committee” an regarding “EC Meet- ing” following memo, be held the week. As part of Melnuk included as attachments documents entitled USA, 1995,” “Clark Inc. Imperatives April “Clark USA, Inc. 1994 Performance Distribution Grade Level 13 Above,” USA, and “Clark Inc. Scorecard First Quarter, document, 1995.” In the 1995 “Imperatives” USA, placed upon replenishing focus was Clark Inc.’s strategic cash reserve of million reducing $200 Blue capital spending refinery Island to the “minimum sustainable level.” In the “Scorecard” docu- ment, “key achievements” were listed to include “cash balance” and “1995 Imperatives,” key disap- whereas pointments manage- were listed to include “performance ment,” “employee leadership,” “short- morale/lack term thinking,” tragedy.” “Blue Island create,
These documents in several respects, genuine entry issues of material fact that preclude summary First, judgment. although defendant has asserted that it holding company, is mere the “Interoffice Memo” which, face, contains documents on their deal with Clark USA, Inc., matters, and directed the memo itself is “Executive Committee.” The an executive existence of USA, Inc., however, Clark run committee would a hold- argument merely counter to defendant’s it is During and has no his ing company operating personnel. acknowledged they Melnuk the words as are deposition, and, memo in the attachment specifically, written Imperatives.” *27 USA, Melnuk, entitled “Clark Inc. 1995 reading however, another, offered alternative of these stating: page you words, “The words on this read them you actually, are the words as read them. These are Imperatives Refining fact, the 1995 of Clark and Market- ing, regard page Inc., and in this the title on this is incor- added.) (Emphasis Similarly, respect rect.” with to the at- USA, tachment to the memo entitled “Clark Inc. Quarter, 1995,” Scorecard First Melnuk testified his deposition although USA,” that the title states “Clark this document “is in fact a score card of the business of R[efining] Marketing],” again contending Clark and that the title of the document was “incorrect.” At a differing interpretations language minimum, these genuine of these and documents their contents create a precluding entry summary judg- issue of material fact ment. addition,
In
assert that these documents
genuine
create a
issue of material fact as to whether
budget
targeted
defendant’s mandated
cuts were
to
Refining’s capital spending
reduce Clark
on essential
safety training
items such as
and maintenance. Plaintiffs
especially egregious
contend that such commands are
inappropriate
refinery setting dealing
in a
with
highly explosivematerials, where an accident such as oc
According
plaintiff,
curred here is foreseeable.
to
the ac
precisely
type
tions of defendant constitute
of conduct
part
parent company
may
on the
of a
that
be considered
accepted
parental oversight”
“eccentric under
(Bestfoods,
norms of
Melnuk, negative effects was aware of at and maintenance safety, training, cuts on the dated to it nevertheless continued refinery, the Blue Island For with its dictates. Refining comply Clark require Anderson, president union at former example, Ronald deposition testimony in his refinery, stated maintenance preventative of the lack of issue “cut[ ] were forced to employees refinery including — safety to maintenance respect corners” with —was command, way all the chain of up corporate sent Anderson, under the direction According Melnuk. refinery’s safety office,” members of the “corporate only daytime worked department and environmental *28 on a 24-hour basis. shift, operated though plant even perform left to operators untrained were This meant that deposi- In his jobs during the off-shifts. specialized these plant at the as be- described the situation tion, Anderson respect deterioration” with one of “continuous ing maintenance, training, and stated safety, and Anderson, Mel- According to “falling apart.” refinery was remedy the situ- authorization provide nuk would not directly he that, president, union ation, the fact despite also stated Melnuk. Anderson these issues with discussed refinery which around flyers posted were competitiveness and the financial status discussed and production, increases asked for which company, entered into other refineries had out that pointed which “fear this created a testified that Anderson bankruptcy. *** generally who “people in that plant, factor” at the job, their situations, compromised compromise would tempted through fear to position in a placed were corners” they “cut meaning things,” compromise go- “the was place that otherwise they believed because to lose their going was everybody ing to shut down jobs.” evidence,
Based upon
genuine
issue of material
fact was raised as to whether defendant’s extreme cost-
cutting requirements
subsidiary
to the
despite
—dictated
the knowledge that its measures resulted in a dangerous
reduction in training and maintenance
adversely
which
affected safety at the refinery may be considered “ec-
—
centric under accepted norms of parental oversight”
(Bestfoods,
524 U.S. at
L. Ed. 2d at
118 S. Ct.
1889)
at
“plainly
contrary to the interests of the
subsidiary yet
advantageous
nonetheless
parent”
(Bestfoods,
n.13,
testimony of Quirke, Terence an economics planning engineer the Blue Island refinery, to withstand defendant’s summary judgment Quirke motion. testified with respect to the development and implementation of operating budgets at the Blue Island facility. According to Quirke, Melnuk —the president, CEO and COO of both defendant and its subsidiary personally —was *29 actively in involved creating and implementing operating budgets at plant. the Quirke, to According in starting 1993 management implemented a “zero based budget” approach that took into account the actual costs of each item and operation in detail.
According Quirke, to he and colleagues at the refinery established a working budget and assumed that it would management. approved by however, Quirke testified,
be that he informed that “Paul Melnuk had said that was budget inquired Quirke then about was too much.” cut, needed to be and he told that the what items was budget by response, Quirke to be reduced 25%. had compiled items not be cut. a list of that could could expenditures refinery The at the were non- bulk of discretionary including materials raw and utilities — necessary operate plant. remaining The were to 20% including wages, employee controllable, of the costs were training, repairs, equipment benefits, education, According only Quirke, the choice maintenance. to requirement complying with the to reduce costs 25% budget. to Ac- was cut the controllable costs within the cording testimony, deposition Quirke’s this was to eventually, explained budget Melnuk, and, with approved. that, Quirke as was testified these reductions troubling budget cuts, a result the mandated several including refinery, be- events occurred at 20 workers operator ing replaced department, 6 in one and new with training training being entirely eliminated. and refresher plaintiffs,
According defendant ordered when refinery, budget the Blue it knew cuts at Island safety, training, staffing, maintenance education and accordingly, compromised, and, it all was would injury Plaintiffs as a result. foreseeable that would occur that the reflects that the subsid- further contend record iary Finally, plaintiffs had no decision this reduction. Refining’s investigation point own internal Clark training, accident, cited maintenance which a lack having played safety a causative role. as light presented Accordingly, the evidence plaintiffs, genuine fact raised issue of material has been merely respect established with to whether defendant subsidiary. goals parameters The for its or financial question to whether defendant raises a evidence *30 actively aggressive subsidiary’s mandated cuts budget knowing only that these cuts could be accom- plished by training maintenance, dramatic reductions safety. question Moreover, the evidence raises a with forseeability respect injury, appears to the as it opportunities, ordering defendant had several after budget observing negative drastic reductions their change effects, to did course but not. This conduct raises questions material of fact as to whether defendant’s ac- participant liability tions fall within the direct doctrine. opinion today very recognizes sum, In our narrow exception general procedural I rule. underscore the posture grant of this case: it is here on a review of summary judgment. assessing defendant’s motion for ruling, the circuit construe, must, court’s we as we all strictly against evidence the movant—defendant—and liberally opponent plaintiffs. in favor of the With our — opinion today, only plaintiff this court determines that adduced sufficient evidenceto withstand defendant’s mo- summary judgment. today tion for The decision should interpreted indicating telegraphing not be whether ultimately will succeed on the merits of this question cause of That action. is a for the trier of fact to decide trial. joins special
JUSTICE BURKE concurrence.